Lumos secured a $35M extension of its funding – Ron Margalit’s interview with Dan Keeler

Wall Street Journal | October 2016

THE EGYPTIAN pound hit a record low against the dollar on the black market this week after the country’s central bank decided not to devalue the currency, Dahlia Kholaif reports. By Wednesday, the black-market value of the currency was almost 60% weaker than the official exchange rate the central bank has maintained since devaluing the currency in March.

Apparently, investors are unfazed. The country’s stock market surged, notching a gain of around 5% over the course of the week.

The crumbling value of the currency may be part of the reason Barclays decided to sell its Egyptian retail and corporate bank. The British lender announced on Tuesday that it would sell the unit for $500 million to Morocco’s Attijariwafa Bank, Max Colchester writes, ending its 152-year presence in the country. Barclays Bank Egypt, which has around 1,500 employees and 56 branches, was once seen as a jewel in the bank’s sprawling African franchise.

Georgians headed to the polls yesterday to vote in a parliamentary election that came after a closely contested campaign scarred by a car bomb and a shooting, Thomas Grove reports. Results tallied early on Sunday suggested the ruling party was on course to win. Georgian Dream, founded by billionaire Bidzina Ivanishvili, has been in power for four years. The closest challenger was the United National Movement, which enjoyed nearly a decade in power until 2012 under former President Mikheil Saakashvili.

Georgia has been a beacon of pro-Western democracy among ex-Soviet states, but it doesn’t have control of around one-fifth of its territory after fighting a short war with Russia in 2008.

Results also came in yesterday from Morocco’s legislative elections. Moderate Islamists won the election, but analysts expected post-election coalition talks to be difficult. Voter turnout was reportedly low, with fewer than half the eligible population turning out to cast their ballots.

Moroccan voters’ apathy may be partly caused by a sense that the country is making adequate progress. According to Standard & Poor’s, growth in Morocco “will increase moderately over the next few years to average 3% of GDP.” The ratings firm also said a range of key economic indicators would continue to improve, supported by lower energy prices, higher exports and domestic reform.

S&P also provided Saudi Arabia with some welcome relief, saying it viewed the country’s outlook as stable because “the Saudi authorities will take steps to prevent any deterioration in the government’s fiscal position, beyond our current expectations, over the next two years.”

Romania also got a thumbs up, but S&P did caution that “policy uncertainty is likely to remain elevated in the run-up to the December general elections.”

Bond investors continue to pile into frontier markets. According to a term sheet seen by the WSJ, Pakistan raised $1 billion from the offering of a U.S. dollar-denominated Islamic bond, or sukuk, Carol Chan reports. The five-year sukuk was offered with a yield of 5.50%

Bahrain also sold a sukuk bond to international investors as part of a dual-tranche $2 billion issue, Emese Bartha writes. Demand exceeded $7 billion, one of the bookrunners in the deal said.

And on Wednesday, Argentina sold two euro-denominated bonds to borrow a combined €2.5 billion Bartha reports. Investors couldn’t get enough of it, Jon Sindreu writes, demanding as much as €6.3 billion, despite the Latin American nation only recently having returned to international markets after years of legal spats with bondholders due to defaulting on more than $80 billion in 2001. In April, Argentina placed a record $16.5 billion among investors.

On the same day Argentina reached an agreement with the last remaining large “holdout” bondholders of its defaulted debt, according to US mediator Daniel Pollack. In a news release, Pollack said “brief but intensive negotiations” led to a $40.5 million settlement with Banca Arner of Switzerland.

Vietnam’s government has told privatized enterprises to list their shares on the stock market, Vu Trong Khanh writes. Deputy prime minister Vuong Dinh Hue issued a document urging ministries, government agencies and provinces to make a list of enterprises that have been privatized but have not been listed on the stock market. He said these firms must follow government regulations, which state that any state-owned company has to list its shares within one year after its IPO. Several companies in the country haven’t listed their shares years after their IPOs, including the country’s largest brewers, Sabeco and Habeco, Vietnam Airlines and garment maker Vinatex.

Barack Obama on Friday fulfilled a promise made a month ago to Myanmar’s de facto leader, Aung San Suu Kyi, issuing an executive order that formally ends US sanctions on the country, Samuel Rubenfeld writes. The order said the situation that led to the sanctions “has been significantly altered” by Myanmar’s “substantial advances to promote democracy,” including a November 2015 election, the release of many political prisoners and greater freedoms.

Nestlé’s upscale coffee brand Nespresso is suspending imports from South Sudan citing deteriorating security conditions, Nicholas Bariyo reports. The firm has been forced to suspend its operations in South Sudan after violence spread to Central Equatoria in the south of the country, Jacquelyn Campo, the spokeswoman for the South African Nestlé unit, said. It is the latest blow for the economy of the five-year old nation, which started coffee exports for the first time last year in a bid to diversify its oil-dependent economy.

Anti-government protests in the Oromia region of Ethiopia could also disrupt coffee production and transportation, Katherine Dunn reports. With coffee representing the largest source of foreign exchange, and with Oromia growing the majority of Ethiopia’s beans, any disruption could be painful for Ethiopia and could affect what blends and varieties higher-end roasters can offer.

Just over two weeks ago, President Obama hosted the second US-Africa Business Forum. Although the roughly $9 billion worth of deals announced at the forum was much smaller than that following the 2014 version of the event, feedback from business leaders, both African and American, has been largely positive.

One of the most important effects of the event, Rahama Wright, founder of shea butter importer Shea Yeleen, told the Journal, was that it demonstrated the “clear commitment from the US government to keep building these relationships, and convening the private sector and governments from both sides to look at mobilizing capital.”

Bruce Cleaver, the CEO of De Beers, told the WSJ it was particularly encouraging to hear “African presidents talking frankly about the issues in their countries and their efforts to improve investment in their countries.”

Cleaver said the sense of competition between presidents could also have an impact. “It was very powerful for [some leaders] to be in a room hearing presidents of other African countries saying ‘I’ve had 8.5% growth over the past x years’,” he added.

In the wake of the forum, more needs to be done, though, Wright said: “The foundation has been laid but now it’s up to the governments and private sector to move from talk to action.”

Power Africa is among those attempting to turn talk into action. At the forum, the organization, which was created by Barack Obama to help drive private sector investment in Africa’s power sector, announced more than $1 billion in new debt and financing commitments for a broad range of projects, primarily in the renewable energy space. Andy Herscovitz, coordinator for Power Africa, told the Journal that Power Africa is also supporting efforts to design low-power, high-efficiency appliances that will work well with relatively low-power off-grid solar generators.

Lumos, a Dutch start-up selling off-grid pay-as-you-go solar power systems in Nigeria, announced at the New York event that it had secured a $35 million extension of its funding from the US government’s development finance institution, OPIC. Describing the OPIC deal as a milestone, Ron Margalit, a principal at Lumos, told the WSJ that securing financing was still the greatest challenge facing companies in the off-grid solar market. But, he added, “as financiers see customers spending money on energy that was, until now, spent on diesel and generators, they will gain more confidence” and begin to consider investing.

The high level of demand for off-grid power generation in Africa is undisputed, but proponents of renewable solutions to the power shortfall might be alarmed to read a new report by TecSci Research that predicts “robust growth” in the market for diesel generators in Africa. The firm said “the market for diesel gensets in Africa is projected to grow at a [compound annual rate] of over 12% during 2016-2021.”

At the Financial Times’ Africa conference in London this week, several speakers emphasized the need to recognize the hurdles to Africa’s progress, and the unintended consequences of it. Perhaps the starkest warning came from Mo Ibrahim, whose foundation published its 10th annual African governance report this week. “Governance in Africa has been stagnating for three or four years,” he said. “Progress started to be halted, as if the period of economic growth gave our rulers…scope to misbehave. Without good governance you get conflict.”

South Africa’s finance minister Pravin Gordhan said inequality of opportunity was another concern: “Citizens are becoming very aware that they are not [benefitting] from…economic growth,” he said.

On a more upbeat note, Standard Chartered Africa economist Razia Khan added: “There isn’t a lot more that needs to start going right to unleash the growth potential in Africa.”


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